T-Mobile hot spots growing like wildfire

Paid sites even successful against free rivals, firm says

By DAN RICHMAN, SEATTLE POST-INTELLIGENCER REPORTER

Published 10:00 pm, Sunday, June 12, 2005

In its first-ever progress report on a technology it helped popularize, Bellevue's T-Mobile USA Inc. last week said its network of wireless Internet access points, or hot spots, is expanding at a rapid and growing rate.

The company, a division of German telecom giant Deutsche Telekom, said its wireless fidelity, or Wi-Fi, hot spots are weathering competition from companies and cities that offer similar coverage at no cost.

Among the key metrics released last week:

Since 2002, when T-Mobile began creating hot spots, it has established more than 12,220 of them worldwide, of which more than 5,700 are found in the United States.

About 15 million prepaid customers and others -- including those using the service at no charge on a 24-hour pass, available at all T-Mobile hot spots -- have logged in at a hot spot. About 8 million people logged in during 2004 alone. In the past 90 days, nearly 3 million logged in, and in the past 30 days, more than 1 million did so.

More than 450,000 people are currently signed up for hourly, daily, monthly or yearly accounts letting them use hot spots. In this year's first quarter, more people became customers than in all of 2003.

Customers are spending more and more time using hot spots. In 2003, the average session lasted 23 minutes. Last year, it lasted 45 minutes, and in the past five months, 64 minutes.

An increasing number of customers aren't the originally targeted laptop-toting businesspeople connecting in airports and hotel rooms and lobbies. They're students, retired people, cabdrivers and others, using hot spots to exchange e-mails and digital photos and to download music and movies.

In 2004, 90 terabytes of Wi-Fi data moved across T-Mobile's network. (A terabyte is 1 million megabytes.) In December alone, 10 terabytes moved. In May, 18 terabytes crossed the wire.

Every FedEx Kinko's and Borders Books & Music store in the United States is a T-Mobile hot spot, "unless they got built within the past five minutes," said Joe Sims, vice president and general manager of the company's hot-spot operations.

In addition, of the 4,593 stores owned and operated by Starbucks in the United States as of May 29, more than 3,600 are T-Mobile hot spots. (Editor's Note: The original version of this story misstated the number of Starbucks hot spots.)

One analyst was impressed with T-Mobile's numbers. "The numbers show that Wi-Fi is no longer an obscure, upstart technology. It's gaining credibility," said Roberta Wiggins, a senior research fellow with the Yankee Group.

"T-Mobile have been the most aggressive among the U.S. cellular operators, and they're the first to provide subscriber numbers, which I think have increased very impressively."

Sims declined to provide any financial details on hot spots, including their contribution to the company's revenue or net income.

"It's like asking whether voice mail is profitable -- its financial impact isn't relevant to our business model," he said.

The service costs $6 per hour for the first hour, then 10 cents per minute. A 24-hour pass costs $10, a one-week pass is $20 and a one-month pass is $40, or $30 if prepaid for a one-year period.

T-Mobile said last week that it has entered roaming deals with other hot-spot providers, permitting T-Mobile customers to access hot spots in 39 airports -- including Sea-Tac -- for an extra charge.

Access is already available in 31 other airports.

The company also said it's adding wireless Internet access to about 100,000 Marriott, Hilton, Doubletree, Renaissance and Ritz-Carlton rooms, in 525 U.S. hotels, within a matter of weeks, through a roaming partnership with iBahn, of South Jordan, Utah. T-Mobile already has hot spots in many Red Roof Inns and Hyatt hotels.

T-Mobile's for-fee hot spots must compete with for-free wireless connectivity offered in dozens, if not hundreds, of urban coffee shops. For example, about 13.7 percent of the 797 Wi-Fi hot spots in Seattle metropolitan area are free, according to a study released earlier this month by researcher Bert Sperling.

They must also compete with large-scale wireless-connectivity installations in Philadelphia; Jacksonville, Fla.; Duluth, Minn.; and parts of Seattle that use a technology called Wi-Max.

The free services "aren't cutting into our revenue at all," Sims said. "It's driving demand for our service, which unlike those is commercial-grade, robust and secure."

He said the company hasn't released complete statistics on its hot spots before now "not out of reluctance, but because the market has really changed in the past several months, so it was the right time to share this information."

But Wiggins, the analyst, said T-Mobile held off until now so as to compare less unfavorably with the skyrocketing number of cellular-service customers and to avoid revealing competitive information.